Government Financing and Interest Rates in a Three Assets Sidrauski-based Model

Eduardo Pozo
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Eduardo Pozo: University of Zaragoza, Spain

Macroeconomics from EconWPA

Abstract: In this paper we formulate a Sidrauski-based model with three assets in which we introduce public bonds into the utility function of agents, with the purpose of analyzing some related questions with regards to the consequences of the financial activity of the government and the determination of the interest rates. The results obtained permit us to conclude that, within this framework: 1.-financial decisions of government will not influence the steady state levels of consumption and capital, and 2.-the inflation rate affects the real interest rate on bonds negatively.

Keywords: Government Financing; Money Demand; Inflation Rate; Interest Rates; Sidrauski Model. (search for similar items in EconPapers)
JEL-codes: E41 E43 (search for similar items in EconPapers)
Date: 2000-06-29
Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on A4 paper; pages: 12
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0004017

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